Shakira and Joe Biden get Davos 2017 under way, as Brexit fears hit pound - as it happened

Nick Fletcher (earlier) and Graeme Wearden in Davo

from on 2017-01-16 23:01 (#291VG)

Earlier:

10.57pm GMT

Hello again. Davos has been busy tonight with meetings, nobnobbing, some exclusive private dinner, and plenty of armed police to deter anyone from sneaking around where they shouldn't.

"Responsive means that we listen to and interact with those who have entrusted us with leadership.

It is always important to prioritize the public social good over our own interests. We must emphasize humanization over robotization."

"Sometimes it seems that the world is overwhelmed by pessimism and cynicism. But we have to look in a confident way into the future."

7.21pm GMT

Elsewhere in Davos, PricewaterhouseCoopers has reported that many bosses are losing faith in globalisation (a journey that many people took a while ago).

My colleague Larry Elliott explains:

Executives running the world's leading companies share public scepticism about the benefits of globalisation and doubt whether breaking down barriers to trade has helped tackle climate change or inequality.

The annual health check of global boardrooms conducted by the consultancy firm PwC found the mood more upbeat than a year ago, despite the shockwaves caused in 2016 by the vote for Brexit and the victory of Donald Trump in the US presidential election.

44% of CEOs interviewed by @PwC says globalisation failed to narrow gap btw rich&poor-@wef calls 4 new inclusive index to complete GDP

7.12pm GMT

It begins! #wef17 pic.twitter.com/sFRYq88XMo

6.23pm GMT

WEF's final Crystal Award goes to actor Forest Whitaker, for his work on conflict resolution in the developing world.

The star of The Last King of Scotland explains that his Foundation helps young people to become the change they want to see in the world (hat-tip to Gandhi).

Very honored to receive the Crystal Award at the World Economic Forum tonight! #wef17 pic.twitter.com/q3wVcCN7lp

6.13pm GMT

Shakira, the Columbian performer and singer, also receives a Crystal Award from WEF for her humanitarian work.

Today's babies will solve tomorrow's problems. All of us must pick up where governments leave off. @shakira @wef pic.twitter.com/k9MwdEwBLI

"It's the smart thing to do, the strategic thing to do, and the just thing to do."

5.50pm GMT

Over in the WEF congress hall, violinist Anne-Sophie Mutter is receiving a crystal award from the Forum for her work helping young musicians.

She says that music can play a role in making a better, more peaceful world as it has no ideology.

If one could eat resolutions and words, no-one would starve.

5.26pm GMT

Outgoing US vice-president Joe Biden is telling the World Economic Forum that he's optimistic that cancer can be beaten.

I've already spoken to the vice-president elect who is a good man, about my willingness to continue to work with him and the incoming administration, to be as committed and enthusiastic as we are about the goal of ending cancer as we know it.

My prayer is that they will do that as well.

"The one thing i can tell you, there's hope."

Biden concludes saying just as President Kennedy was "unwilling to postpone" sending man to moon so too should pursuit of ending cancer

"After I leave office ...I will set up The Biden Cancer Initiative."- @VP #wef17

On Cancer Moonshoot: There is now data that didn't even exist a year ago... increasing chances exponentially, says Joe Biden, US VP #wef 17

5.07pm GMT

The Davos security people aren't taking any chances this year -- Bloomberg reports that they're carrying guns to shoot down any drones that approach WEF.

An image to time-stamp @wef 2017 -- Anti-drone guns being deployed
by @sdawsonphoto via @bloombergimages #Davos #davos2017 @business pic.twitter.com/KLl0Ym25D0

5.04pm GMT

Over in Davos, the 2017 World Economic Forum is now getting underway.

2.54pm GMT

The pound has stabilised a little after its plunge to a three month low earlier in the day. But the fears of a hard Brexit, prompted by comments from the UK government ahead of prime minister Theresa May's speech on Tuesday, mean that sterling is still down around 1% against the dollar.

It is currently down 0.8% at $1.2078 against the dollar and 0.6% against the euro at a1.1384.

2.38pm GMT

The UK Treasury has welcomed the upgrade to its forecasts by the IMF. It said:

The fundamentals of the UK economy are strong, and today's IMF forecasts confirm their view that the UK was the fastest-growing major advanced economy last year. We have reduced the deficit by almost two thirds, cut taxes for millions of working people, and employment is at a near-record high. The Autumn Statement reaffirmed the government's commitment to return the public finances to balance as soon as practicable, while providing flexibility to support the economy as we exit the EU.

2.36pm GMT

Britain's business community has weighed into the Brexit debate ahead of an update by Theresa May on Tuesday:

Britain risks a "disorderly crash landing" if it assumes it can safely walk away from troublesome Brexit talks, business leaders have said, in a last-ditch plea for a negotiated settlement with Europe.

As Theresa May prepares to reveal an uncompromising set of UK objectives on Tuesday, pressure is mounting on the prime minister to take a firm line with other member states and ultimately fall back on World Trade Organisation tariffs if no deal can be agreed.

2.25pm GMT

And this is the IMF's own summary, which may or may not imply that we are heading into a brick wall pic.twitter.com/qy8LHmlTzq

2.03pm GMT

Ahead of Davos the International Monetary Fund has issued a new warning on the global economy. Katie Allen writes:

The global economy faces a multitude of risks in 2017, ranging from rising protectionism spearheaded by Donald Trump to a severe slowdown in China, the International Monetary Fund has warned.

The Washington-based fund used an update to its economic forecasts to highlight popular antipathy towards international trade and a widening in the gap between rich and poor. It called on governments to tackle inequality by helping people find work in fast-changing jobs markets shaken up by technology and globalisation.

1.11pm GMT

Now over to Greece. The prospect of further instability in the eurozone is mounting as consternation grows over the inability of Greece and its creditors to complete a second bailout review of the debt-stricken economy. Helena Smith reports from Athens:

Fears are growing in Greece and abroad over continued friction between Athens and its creditors. Prolonged foot dragging over completion of a second bailout review has triggered mounting speculation that the debt-stricken country could be headed for new polls if it fails to come to some accord with lenders.

The prospect of the IMF not participating in the current programme - mooted last week by Germany's powerful finance minister Wolfgang Schauble who suggested the European Stability Mechanism could assume the role instead - may have elicited thinly disguised euphoria in Greece but has been met with angst elsewhere. Schauble also hinted that departure of the IMF could mean even stricter terms for Greece - in short, a fourth bailout programme for a country now in its eighth year of austerity-induced depression.

This morning the ESM's managing director Klaus Regling highlighted concerns saying whatever happened the German Bundestag would have to ratify the move. Berlin is the biggest contributor of the three rescue programmes that since 2011 have kept Greek bankruptcy at bay and had originally said it would only continue disbursing funds if the IMF was on board.

If the review's conclusion is delayed for much longer officials worry Greece will miss the next target: of getting Greek bonds included in the European Central Banks QE programme in March. All off which has put Athens' leftist led administration under additional pressure to come up with alternatives to the "illogical" demands it says the IMF is now making - starting with the body's insistence that it legislate further multi-year pension cuts and income-tax hikes worth a4.5bn to ensure that primary surplus targets are met. Speculation of euro exit is once again gaining currency despite fiscal adjustment and the immense sacrifices the country has already made. Amid talk of the drachma returning, the government has signalled it is now working on new proposals for lenders which it will present at the next euro group of euro area finance ministers on January 26.

12.52pm GMT

The World Economic Forum has also found that incomes across many advanced countries shrank since 2008; another sign that economic policies need to change.

WEF's new report on economic inclusivity (see last post) shows that median income shrank by almost 2.5% between 2008 and 2013 across the 26 advanced economies where data is available.

"To respond more effectively to social concerns, economic policy needs a new compass setting, broad-based progress in living standards, and a new mental map in which structural reform is reimagined and reapplied to this task, with chief economic advisers and finance ministers prioritizing it every bit as much their traditional focus on macroeconomic, financial supervisory and trade policy."

12.41pm GMT

Back in snowy Switzerland, a new report from the World Economic Forum makes rather dispiriting reading for the UK.

Britain's wealth and gender inequality, generation gap and weak productivity growth mean it lags behind many rival advanced economies when it comes to economic inclusivity.

This recognition and the rebalancing of policy priorities it implies is what is required for governments to respond more effectively to decelerating growth and rising inequality - to take seriously the social frustrations increasingly being expressed through the ballot box and on the street.

Such frustrations have an essential validity. The implicit income distribution system within many countries is in fact severely underperforming or relatively underdeveloped, but this is due to a lack of attention rather than an iron law of capitalism.

11.11am GMT

The world economic recovery is still weak, according to China's president Xi Jinping.

Speaking in the Swiss capital Bern before he heads off to Davos, he added that China would make its contribution to the recovery and his country's economy was peforming steadily overall.

10.31am GMT

More on the eurozone trade figures from IHS Markit chief economist Howard Archer:

An improved traded good performance in November is supportive to belief that Eurozone GDP growth improved in the fourth quarter of 2016. While it is still questionable as to whether net trade contributed positively to fourth-quarter 2016 Eurozone GDP growth, November's improved trade performance at the very least dilutes the likelihood that net trade was an appreciable drag on activity. Net trade made a marginally negative contribution to Eurozone GDP growth in the third quarter, therefore being a factor limiting GDP growth to 0.3% quarter-on-quarter. In real terms, exports of goods and services edged up just 0.1% quarter-on-quarter in the third quarter while imports rose by 0.2% quarter-on-quarter.

We believe that Eurozone GDP growth may well have improved to 0.5% quarter-on-quarter in the fourth quarter of 2016 (from 0.3% quarter-on-quarter in both the third and second quarters).

10.22am GMT

It's a thin day for data but there have been some eurozone trade figures, showing an increase in the trade surplus:

An encouraging rebound in the #euro-zone goods trade balance from a20.1bn to a25.9bn in Nov, & export orders bode well for Dec. & Jan. pic.twitter.com/CjwUh15PLf

#Eurostat reports improved #Eurozone traded #goods performance in Nov as seasonally adjusted #exports up 3.2% m/m & imports up 1.8% m/m (1)

(2) Better Nov #Eurozone traded goods performance boosts hopes Q4 #GDP growth may have been 0.5% q/q, but net trade may still be little help

10.16am GMT

The European banking sector is also losing ground after agency DBRS cut Italy's credit rating on Friday, a move which could raise borrowing costs for the country's financial businesses. UBS said:

The downgrade will impact haircuts applied to Italian govies [government bonds] used as collateral by banks in monetary policy operations with the ECB. Haircuts are calculated based on the best available rating for an issuer and DBRS had the last A rating on Italy (S&P: BBB-, Moody's: Baa2, Fitch: BBB+). As a consequence and depending on the maturity of the Italian govies pledged, we estimate the downgrade could lead to the need for a 6-9% top-up of the govies used as collateral.

9.23am GMT

The comments from Theresa May over the weekend are nothing new, says Berenberg. Its senior UK economist Kallum Pickering said:

While UK prime minister Theresa May has previously stated that she doesn't recognise the concept of a 'hard Brexit' the market clearly does. Comments by May hinting at a hard Brexit sent the pound lower over the weekend. But is any of it new information? No, not really. May has stated on several occasions that she will prioritise regaining control of the UK's borders and laws over access to the single market. In May's speech tomorrow we expect her to reiterate the same message, again.

While the prime minister hasn't gone so far as to plainly state the potential impacts of such an arrangement, her broad aims for post-EU Britain have been consistently clear for some time now. The commonly heard 'uncertainty' about May's intentions is hard to justify. Unless May does a complete U-turn from here, any hope of full single market access for post-EU Britain is more or less out of the question. We can presume also, given that May has gone to the effort of setting up a trade department, currently headed by MP Liam Fox, and has stated on a number of occasions that the UK should be able to strike its own trade deals independently of the EU, that an exit from the EU customs union is likely too.

9.03am GMT

Donald Trump's desire for a UK-US trade deal to be ready as soon as Britain leaves the EU came in an interview with Michael Gove, and is being covered by my colleague Andrew Sparrow in the politics live blog:

8.42am GMT

Theresa May's speech on Brexit is not the only event which could influence the pound:

Big GBP week underway. UK CPI, jobs & retail sales in addition to May's Tuesday speech

8.41am GMT

The pound has come off its worst levels, but is still down more than 1% at $1.2041. Kathleen Brooks, research director at City Index, said:

After falling below the key 1.20 level on Sunday, [the pound] has since staged a comeback.... The was partly driven by comments from Donald Trump in an interview with The Times newspaper where he said that the UK was at the top of a list for a trade deal with the US, and that the UK did a great thing by leaving the EU.

Other factors that have soothed the pound this morning include some reassurances from the UK Treasury that it will address investors concerns that may arise from Theresa May's speech on Tuesday. This "recovery" is also typical after a move below a key technical level such as 1.20 in the pound/dollar, and thus may only be temporary.

Looking ahead, we think that the pound is likely to remain vulnerable, and, in the short term, the market could once again test the air below 1.20, and the lows from October's flash crash. Volatility levels in the pound/dollar as measured by the options market, have risen once again on Monday, taking the 1-month GBP/USD volatility level to a fresh 4-month high. This suggests that investors are expecting further large moves from the pound in the short term.

Some have wondered why the foreign exchange market continues to be "shocked" by news about a hard Brexit, after all the UK's exit from the single market has always been on the cards and is not a new concept. I would argue that the 'Brexit theme as bad news for the pound' is such an ingrained trend at this stage that it really doesn't matter what May says or fails to say on Tuesday. Instead, it's all about market dynamics, and right now the balance of market participants are shorting the pound. It's a bit like a tipping point, once a trend gets critical mass, like the pound downtrend, then news headlines can have big impacts, as they generate another wave of selling.

8.34am GMT

Ahead of the Davos gathering, the World Economic Forum warned on the risk of rising inequality, and here is more evidence. Larry Elliott writes:

The world's eight richest billionaires control the same wealth between them as the poorest half of the globe's population, according to a charity warning of an ever-increasing and dangerous concentration of wealth.

In a report published to coincide with the start of the week-long World Economic Forum in Davos, Switzerland, Oxfam said it was "beyond grotesque" that a handful of rich men headed by the Microsoft founder Bill Gates are worth $426bn (350bn), equivalent to the wealth of 3.6 billion people.

8.22am GMT

With little in the way of economic or corporate news, and the US markets shut for Martin Luther King day, the fall in the pound is likely to dominate investor sentiment.

8.16am GMT

No surprise given the influence of the weak pound on its overseas constituents, but the FTSE 100 has reached a new peak in early trading.

The leading index is up 0.2% to an intra-day high of 7354, despite a fall in banking shares after Goldman Sachs cut its recommendation on Royal Bank of Scotland from buy to neutral. The financial sector is also being undermined by worries about the repercussions of a hard Brexit on the City.

8.11am GMT

Sterling could fall as low as $1.10 according to Neil Wilson, senior market analyst at ETX Capital:

Cable is now clinging to the $1.20 handle for dear life and seems to have steadied a little as trading commences in London - pound trading in Asia is often quite volatile because of thin liquidity. We've also got the pound trading at its weakest level against the euro since November.

It's looking more and more like a 'hard' Brexit is in the offing and markets are responding. The currency market is the most efficient and swiftest to price it in. However the full effects of a hard Brexit are not yet completely discounted by the markets and so we could have further to run depending on what is said tomorrow.

8.03am GMT

Here's the pound's continuing decline:

7.49am GMT

The pressure on the pound is only likely to get worse, with volatility increasing, according to economists at UniCredit:

[We] believe that sterling is a sell on any potential rallies. Even in the event of a more "conciliatory" tone (by Mrs. May hinting at seeking out a transitional agreement with the European Union, for instance) the respite on sterling is very likely to be only temporary. As long as control over immigration remains the UK government's anchoring point, it is virtually impossible to envision anything other than an exit from the EU's single market.

7.45am GMT

With the pound weaker, the FTSE 100 is indeed expected to hit new heights:

Our European opening calls:$FTSE 7351 up 13
$DAX 11591 down 39
$CAC 4907 down 15$IBEX 9481 down 31$MIB 19436 down 79

7.42am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The pound has come under renewed pressure ahead of a key speech by UK prime minister Theresa May on Tuesday, where she is expected to spell out Britain's negotiating strategy for Brexit talks.

The weakness of the pound has been one of the key catalysts as to why the FTSE100 has managed to push strongly above its previous all-time highs, as well managing to break record after record in closing higher every day since just before Christmas.

This pattern looks set to continue again, with a higher open for the UK benchmark, as we head into a new week after the pound fell below the 1.2000 level for the first time since the flash crash lows in October last year in Asia overnight.

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